Fragility foretold

Economically the writing had been on the wall since before the new government had taken office, and some course correction measures were already in place when it took the reins. There has been a wander into fantasy-land as the PTI attempted to dodge reality and raise funds through ‘friendly states’. Even if successful the move would never have produced enough hard cash to pull the country back from the brink. In recent days there has been a welcome outbreak of common sense and the IMF seems likely to be approached in the near future with much of the groundwork probably completed during the routine visit of an IMF team.

The World Bank (WB) has now weighed in with a detailed report that projects economic ‘fragility’ for the next two years due to a combination of low economic growth and high inflation as a result of the stabilisation measures that are inevitably going to come into play within months if not weeks. This perspective is at variance with the governmental agenda of job creation and reducing levels of poverty.

All three of the big lenders — WB, the IMF and the Asian Development Bank — are of the same mind and the government is going to have to bow to painful requirements if it is to benefit from the IMF. What is being little discussed at least openly is the possibility of the US scuppering an IMF deal as it suspects the money may go to servicing the debt owed to the Chinese. Further, the decisions and subsequent actions of the Financial Action Task Force are going to impinge directly on the climate in which Pakistan seeks to extricate itself from the morass.

Much is going to hinge on how well or otherwise the government handles itself in the coming weeks. The dithering and time-wasting associated with playing hunt-the-treasure before the big lenders cracked the whip does not bode well. It is fast approaching the watershed at which point it can no longer lay blame at the door of its predecessor. Fragile, handle with care. 

Published in The Express Tribune, October 10^th, 2018.

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